UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(MARK ONE)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended August 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ____________________ to _____________________
Commission File number 1-7924
VALLEY RESOURCES, INC.
(Exact name of Registrant as specified in its charter)
Rhode Island 05-0384723
(State of Incorporation or Organization) (IRS Employer Identification No.)
1595 Mendon Road, Cumberland, Rhode Island 02864
(Address of principal executive offices)
Registrant's Telephone Number, Including Area Code (401) 334-1188
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -----------------------
Common Stock American Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K. [__]
The aggregate market value of the common stock held by non-affiliates,
computed on the basis of $18.375 per share (the closing price of such stock on
November 15, 1999 on the American Stock Exchange) was $91,746,889.50.
As of November 15, 1999 there were 4,993,028 shares of Valley Resources,
Inc. Common Stock, $1 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Consolidated Financial Statements, Notes to Consolidated Financial
Statements, Report of Independent Certified Public Accountants, Management's
Discussion and Analysis, Summary of Consolidated Operations, Dividends, and the
Market Data appearing on pages 1 and 6 of the Registrant's Annual Report to
Stockholders for the fiscal year ended August 31, 1999 are incorporated by
reference in Parts I, II and IV.
The Directors and Executive Officers of the registrant, Executive
Compensation and Security Ownership and Certain Beneficial Owners and Management
appearing in the Proxy Statement dated November 9, 1999 as filed with the
Securities and Exchange Commission are incorporated by reference in Part III.
2
PART I
Item 1 Business
--------
Valley Resources, Inc. (the "Corporation") is a holding company organized
in 1979 and incorporated in the State of Rhode Island. The Corporation has five
wholly-owned active subsidiaries: Valley Gas Company ("Valley Gas") and Bristol
& Warren Gas Company ("Bristol & Warren" and collectively with Valley Gas, the
"Utilities")--regulated natural gas distribution companies; Valley Appliance and
Merchandising Company ("VAMCO")--a merchandising and appliance rental company;
Valley Propane, Inc. ("Valley Propane")--a wholesale and retail propane company;
and Morris Merchants, Inc., d/b/a the Walter Morris Company ("Morris
Merchants")--a wholesale distributor of franchised lines in plumbing and heating
contractor supply and other energy-related business. The Corporation also owned
an 80% interest in Alternate Energy Corporation ("AEC") during fiscal 1999. The
Corporation acquired an additional 10% interest from AEC's current management on
September 1, 1999 and has the obligation to acquire the remaining 10% in 2001.
AEC sells, installs and designs natural gas conversion systems and facilities,
is an authorized representative of the ONSI fuel cell, holds a patent for a
natural gas/diesel co-firing system and has a patent pending for a device to
control the flow of fuel on dual-fuel equipment.
Utility Operations
- ------------------
Gas Sales and Transportation
The Corporation's utility operations are conducted through the Utilities.
The Utilities had an average of 63,172 customers during the fiscal year ended
August 31, 1999, of which approximately 91% were residential and 9% were
commercial and industrial. For the fiscal year ended August 31, 1999, 52% of gas
sales were to residential customers and 48% were to commercial and industrial
customers.
The Utilities provide natural gas service to residential, commercial and
industrial customers and transportation services to industrial customers. Valley
Gas' 92 square mile service territory is located in the Blackstone Valley region
in northeastern Rhode Island with a population of approximately 250,000. Bristol
& Warren's 15 square mile service territory is located in eastern Rhode Island
with a population of approximately 35,000. Since November 1995, the Utilities
have operated under a single rate structure.
The following table shows the distribution of gas sold and transported
since fiscal 1995 in millions of cubic feet ("MMcf"):
For the Fiscal Year Ended August 31,
---------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Residential .................. 4,165 4,225 4,393 4,612 4,078
Commercial ................... 2,054 2,060 2,161 2,252 1,953
Industrial-firm .............. 1,024 1,133 1,440 1,391 1,338
Industrial-seasonal .......... 692 648 1,110 1,047 1,298
Transportation-firm .......... 543 346 -0- -0- -0-
Transportation-seasonal ...... 4,442 4,895 5,043 3,273 4,419
------ ------ ------ ------ ------
TOTAL ..................... 12,920 13,307 14,147 12,575 13,086
====== ====== ====== ====== ======
Firm customers of the Utilities use gas for cooking, heating, water
heating, drying and commercial/industrial processing. Certain industrial
customers use additional gas in the summer months, when it is available at lower
prices. These customers are subject to having their service interrupted at the
discretion of the Utilities with very little notice. This use is classified as
seasonal use. As discussed below, the margin on seasonal use is passed through
the Purchased Gas Price Adjustment ("PGPA") to lower the cost of gas to all
categories of firm customers. Bristol & Warren retained the margin on seasonal
sales prior to November 1995.
3
The primary source of utility revenues is firm use customers under tariffs
which are designed to recover a base cost of gas, administrative and operating
expenses and provide sufficient return to cover interest and profit. The
Utilities also service dual fuel, interruptible and transportation customers
under rates approved by the Rhode Island Public Utilities Commission ("RIPUC").
Additionally, Valley Gas services cogeneration customers under separate contract
rates that were individually approved by the RIPUC.
The Utilities' sales tariffs include a PGPA which allows an adjustment of
rates charged to customers in order to recover all changes in gas costs from
stipulated base gas costs. The PGPA provides for an annual reconciliation of
total gas costs billed with the actual cost of gas incurred. Any excess or
deficiency in amounts collected as compared to costs incurred is deferred and
either reduces the PGPA or is billed to customers over subsequent periods. The
PGPA does not impact operating income as it effectuates a dollar for dollar
recovery of gas costs. All margins from interruptible customers are returned to
firm customers through the workings of the PGPA.
Utility revenues include a surcharge on firm gas throughput to collect a
portion of the costs to fund postretirement medical and life insurance benefits
above the pay-as-you-go costs included in base tariffs. The surcharge was
authorized by the RIPUC in a generic rate proceeding and is being phased in over
a ten-year period which commenced September 1, 1993. Effective November 1995,
the current year funding of postretirement medical and life insurance benefits
is included in base tariffs. In September 1996, the RIPUC authorized the funding
shortages from the first two years of the phase-in to be recovered through a
surcharge over the next three fiscal years.
The prices of alternative sources of energy impact the interruptible and
dual fuel markets. The Utilities serve these customers in the nonpeak periods of
the year or when competitively priced gas supplies are available. These
customers are subject to service discontinuance on short notice as system firm
requirements may demand. Prices for these customers are based on the price of
the customers' alternative fuel. In order to mitigate the volatility of earnings
from interruptible and dual fuel sales, the Utilities roll into the PGPA the
margin earned on these interruptible sales and all margins in excess of $1 per
thousand cubic feet ("Mcf") of gas sold to dual fuel customers. This margin
credit reduces rates to firm customers. This margin treatment alleviates the
negative impact that swings in sales can have on earnings in the highly
competitive industrial interruptible market.
Seasonality
The Utilities business is seasonal. The bulk of firm distribution and sales
are made during the months of November through March. As a result, the highest
levels of earnings and cash flow are generated from the quarters ending in
February and May. The bulk of the capital expenditure programs are undertaken
during the months of May through October, causing cash flow to be at its lowest
during the quarters ending in November and August.
Short-term borrowing requirements vary according to the seasonal nature of
sales and expense activities of the Utilities. As a result, there is a greater
need for short-term borrowings during periods when internally generated funds
are not sufficient to cover all capital and operating requirements, particularly
in the summer and fall. Short-term borrowings utilized for construction
expenditures generally are replaced by permanent financing when it becomes
economical and practical to do so and where appropriate to maintain an
acceptable relationship between borrowed and equity resources.
Rates and Regulation
The Utilities are subject to regulation by the RIPUC with respect to rates,
adequacy of service, issuance of securities, accounting and other matters.
4
Gas Supply and Storage
Tennessee Gas Pipeline Company is the major natural gas transporter for
Valley Gas under long-term contracts. Bristol & Warren's principal gas
transporters are Algonquin Gas Transmission Company and Texas Eastern
Transmission Corporation. The Utilities purchase natural gas from several
suppliers on a long-term firm basis, as well as on the spot market whenever
available.
Year-Round Wellhead Firm Supply - Valley Gas is a charter member of the
Mansfield Consortium, a group of five local distribution companies that joined
together to use their combined market power to secure favorable terms for
long-term gas supply. In addition, Valley Gas is an investor in Boundary Gas,
Inc. and a customer of Alberta Northeast, LTD, both of which were founded by
groups of gas distribution companies in the Northeast to import natural gas from
Canada.
Valley Gas and Bristol & Warren together have 17,367 dekatherms per day
("Dth/day") of year-round firm supply under long-term contracts with two
domestic and two Canadian suppliers. Of these contracts, 15,300 Dth/day are due
to expire on June 30, 2002, 1,067 Dth on December 1, 2002 and the remainder
extends through 2012. All of the Utilities' gas supply contracts are
spot-indexed based. The Utilities have flexible take requirements, with no gas
categorized as "baseload" supply which must be taken every day.
Winter-Only Firm Supply - The Utilities believe they are well-positioned
with respect to winter-only firm supply. Their actual and prospective long-term
contracts are with major participants in this market, and contract prices are at
competitively favorable terms.
Liquefied Natural Gas ("LNG") - Valley Gas is entitled to 5,300 Dth/day of
firm supply from Distrigas, which re-vaporizes LNG at its Everett, Massachusetts
facility for delivery during the winter months to Valley Gas by Tennessee Gas
Pipeline or to Bristol & Warren via Algonquin Gas Transmission. As an option,
Valley Gas may take this gas in its liquefied state for transportation by truck
to and storage at Valley Gas' on-site LNG tank. A further option allows Valley
Gas to increase its maximum daily quantity from 5,300 to 7,550 dekatherms
("Dth"). There are no minimum takes, and the contract runs through October 31,
2005. Valley Gas also has a multi-year contract with Distrigas for 250,000 Dth
of LNG.
Maritimes & Northeast Pipeline - Valley Gas has a one year contract for
180,000 Dth of firm winter-only gas supply which is delivered from Canada by
Maritimes & Northeast Pipeline and then to Valley's city gate by Tennessee Gas
Pipeline.
Pawtucket Power Co-Generation Plant - Valley Gas is entitled under
long-term contract to utilize up to 540 Dth per hour, with a maximum annual
quantity of 333,000 Dth, of natural gas used by Pawtucket Power in its
generation of electricity and steam. This firm gas supply originates in Alberta,
Canada.
Underground Storage - The Utilities have 1,544,258 Dth of underground
storage capacity with Tennessee Gas Pipeline, Texas Eastern Gas Transmission,
CNG Transmission and National Fuel Gas Supply Corporation, with a total maximum
daily withdrawal quantity of 20,589 Dth. The Utilities' inject underground
storage gas during the non-winter months into fields located in Pennsylvania and
New York for subsequent withdrawal during the winter when customer demand is
greatest.
Interstate Pipeline Capacity - The Utilities utilize firm pipeline capacity
for two basic purposes: 1) daily transportation of firm and spot market gas
supply throughout the year from the Gulf Coast to their city gates, and 2)
winter-only transportation of underground storage gas to their city gates.
Gas Supply Pipeline Capacity - Total year-round firm capacity is 24,912
Dth/day. Of this total, 82% expires by November 1, 2002, and the remainder
extends through 2012.
Storage Pipeline Capacity - The Utilities' storage-related pipeline
capacity totals 12,738 Dth/day. About 85% of this capacity expires November 1,
2002, and the remainder extends through 2012.
5
On-Site LNG and Propane Storage - In addition to the gas delivered by the
interstate pipeline, the Utilities have on-site storage facilities for liquid
propane gas ("LPG"), with Valley Gas having about 857,000 gallons and Bristol &
Warren having about 117,000 gallons of LPG storage. Valley Gas also has on-site
storage facilities for 968,320 gallons (about 85,000 Dth) of LNG. Both LPG and
LNG are vaporized into the Utilities' distribution systems during periods of
peak demand and utilized as backup in the event of failure of an upstream
pipeline to deliver needed gas supplies.
Competition and Marketing
The primary competition faced by the Utilities is from other energy
sources, primarily heating oil. The principal considerations affecting a
customer's selection among competing energy sources include price, equipment
cost, reliability, ease of delivery and service. In addition, the type of
equipment already installed in businesses and residences significantly affects
the customer's choice of energy. However, where previously installed equipment
is not an issue, households in recent years have consistently preferred the
installation of gas heat. Valley Gas' statistics indicate that approximately 90%
of the new homes built on or near Valley Gas' service mains in recent years have
selected gas as their energy source.
The Utilities are pursuing new markets believed to have the potential to
provide both growth and/or lessen sales sensitivity to weather: industrial
processing, cogeneration, natural gas vehicles and conversions from oil or
electricity to gas.
In recent utility rate decisions, the RIPUC approved rates which will
retain and attract industrial customers. Additionally, the Utilities have two
rates which promote economic development in its service territory. These rates
provide incentives for companies that add industrial processing load, make a
substantial investment in new natural gas equipment and hire additional
employees.
The cogeneration market is addressed through sales contacts with customers
who have applications suitable to use waste heat through the cogeneration
process. There are established rate tariffs to specifically address the
requirements of the cogeneration market. In addition, Valley Gas has a 50
kilowatt demonstration facility at its Cumberland location which provides
electricity for computer facilities and hot water requirements.
Valley Gas has a compressed natural gas ("CNG ") fueling station at its
Cumberland, Rhode Island headquarters. The use of natural gas in vehicles is
promoted through conversions of its own fleet and the CNG rate approved by the
RIPUC.
The Utilities' residential marketing department seeks to increase
conversions from oil to natural gas through installations of conversion burners
and conversions to natural gas of housing developments that initially chose
alternate energy sources. Additional efforts are made to convert homes with
inactive natural gas service and to replace electric heating systems with
natural gas systems.
The distribution company unbundling process will add competition from a new
source-- natural gas suppliers. The Utilities have received approval from the
RIPUC for transportation rates which allow large commercial and industrial
customers the choice to purchase gas from the Utilities or from natural gas
marketers. Gas purchased by users within the Utilities' territories is
transported to the users by the Utilities. Since the Utilities' profits are
derived from distribution of natural gas and not natural gas sales, this process
is not expected to significantly impact the profitability of the Utilities.
6
Gas Distribution System
Valley Gas' distribution system consists of approximately 900 miles of gas
mains and service lines. Bristol & Warren's gas distribution system consists of
approximately 100 miles of gas mains and service lines. The aggregate maximum
daily quantity of gas that may be distributed through the Utilities from their
own facilities and under existing supply and transportation contracts is
approximately 100 MMcf, and the maximum daily gas sendouts for all sales
customers of the Utilities during the last five fiscal years were 71 MMcf in
1999, 70 MMcf in 1998, 73 MMcf in 1997, 71 MMcf in 1996 and 66 MMcf in 1995.
Gas Marketing
- ------------
The Utilities filed to unbundle their firm commercial and industrial
tariffs with the RIPUC in September 1996. Effective June 1, 1997, the Utilities
were authorized to offer transportation rates to large commercial and industrial
customers and redesign the rates for other customers.
Appliance Contract Sales and Rentals
- ------------------------------------
The Corporation conducts appliance sales, service contract sales and
appliance rentals through its subsidiaries VAMCO and Morris Merchants. VAMCO's
revenues are generated through retail appliance sales, service contract sales
and the rental of gas-fired appliances. Morris Merchants has contracts for the
distribution of certain lines that it wholesales. At this time the Corporation
has no reason to believe it will lose any of its existing lines. The
merchandising subsidiaries are in competitive businesses with competition based
on many factors, including price, quality of product and service.
Propane Operations
- ------------------
The propane operations are conducted through Valley Propane, which sells,
at retail, liquid propane gas to residential and commercial customers in Rhode
Island and nearby Massachusetts. At August 31, 1999, Valley Propane had 2,508
customers. Valley Propane also supplies propane to holding customers of the
Utilities. These customers are serviced by Valley Propane until the Utilities
can connect mains and service lines. Valley Propane is also impacted by weather,
as a large percentage of its customers use propane as a primary source of heat.
Valley Propane increases and decreases the selling price of its gas depending
upon supply and competition.
Natural Gas Conversions
- -----------------------
The Corporation conducts natural gas conversions through AEC. AEC generates
its revenues through the engineering and installation of compressed natural gas
refueling stations, the conversion of gasoline and diesel-powered vehicles to
natural gas and through the implementation of its patented process to co-fire
natural gas and diesel fuel in engines, primarily generators.
In fiscal 1998, AEC opened a public natural gas vehicle ("NGV") refueling
station located at the Valley Resources corporate headquarters. AEC buys gas
from Valley Gas and retails it to a number of different customers.
The Corporation acquired an 80% interest in AEC in May 1996. It acquired an
additional 10% interest from AEC's management on September 1, 1999. The
Corporation is required to acquire the remaining 10%, which is currently held by
the management of AEC, in 2001.
Environmental Proceedings
- -------------------------
For information regarding the Corporation's potential environmental
liabilities, see "Management's Discussion and Analysis of the Results of
Operations and Financial Condition - Liquidity and Capital Resources", pages 36
and 37, and Note H, page 27, in the 1999 Annual Report to Stockholders which is
incorporated by reference herein.
7
Item 2 Properties
1595 Mendon Road, Cumberland, Rhode Island
Office, Sales, and Service Center
This location comprises the headquarters, sales and service operation of
the Corporation, Valley Gas, VAMCO and Valley Propane. It includes accounting,
billing, credit, engineering, garage, maintenance, service, storeroom and
construction. The headquarters and sales office for AEC are also located at this
facility. The Corporation considers these facilities to be suitable and adequate
to meet its needs.
425 Turnpike Street
Canton, Massachusetts
Office and Warehouse Facilities
Morris Merchants conducts its business at this leased warehouse and office
building in Canton, MA. Since its business does not require any special
facilities, its leased facilities are not significant to its operation. The
total lease payments are less than 1 percent of all corporate assets of the
Corporation.
106-B Federal Way
Johnston, Rhode Island
Service Center
AEC conducts its servicing business at this leased garage in Johnston, RI.
The leased facility is not significant to its operations and the total lease
payments are less than 1 percent of all corporate assets of the Corporation.
Scott Road, Cumberland, Rhode Island
LNG Storage Plant
Propane Storage Plant
This facility is used for the storage of LNG and propane used in the
peak-shaving operations of Valley Gas. Its daily delivery capacity of LNG and
LPG is 25,000 Mcf's and 12,000 Mcf's, respectively.
100 Broad Common Road
Bristol, Rhode Island
Office, Sales and Service Center
This location comprises the office, sales and service operation of Bristol
& Warren and includes construction, credit, engineering, garage, maintenance,
service, and storeroom.
Brown Street
Warren, Rhode Island
Propane Storage
This facility is used for the storage of propane used in peak-shaving
operations of Bristol & Warren. Its daily delivery capacity of LPG is 1,600
Mcf's.
The Corporation believes its storage facilities are adequate to meet the
needs of the Utilities for the foreseeable future. All of the storage facilities
are owned. All Valley Gas properties, except leased property, are held in fee.
See Item 1 for discussion of gas supply.
8
Item 3 Legal Proceedings
-----------------
There were no material legal proceedings pending to which the Corporation
or any of its subsidiaries is a party, or of which any of their property is the
subject, except two environmental claims that were asserted against Valley Gas
as referred to in Note H, page 27, in the 1999 Annual Report to Stockholders
which is incorporated by reference herein.
Item 4 Submission of Matters to a
Vote of Security Holders
None
9
Executive Officers of the Registrant
- ------------------------------------
The names, ages, and position of all the executive officers of the
Corporation on October 15, 1999 are listed below, together with their business
experience during the past five years. All officers of the Corporation are
elected or appointed annually by the board of directors at the directors' first
meeting following the Annual Meeting of Stockholders.
Business Experience
Name Age Position During Last Five Years
Alfred P. Degen 52 Chairman, President and Chairman since December 1997;
Chief Executive Chief Executive Officer of
Officer Valley Resources, Inc. since
March 1995; President, Valley
Resources, Inc. from July
1994; Executive Vice Presi-
dent, Philadelphia Gas Works
for more than 5 years prior
to July 1994.
Charles K. Meunier 57 Vice President, Vice President Operations since
Operations December 1994; Assistant Vice
President Operations and Human
Resources prior to December
1994.
Richard G. Drolet 51 Vice President, Vice President Information
Information Systems Systems and Corporate Planning
and Corporate since December 1994; Assistant
Planning Vice President Information
Systems and Corporate Planning
prior to December 1994.
Sharon Partridge 43 Vice President, Vice President, Chief Financial
Chief Financial Officer and Secretary since
Officer, Secretary June 1999; Assistant Vice
and Treasurer President Finance and Treasurer
since December 1994; Assistant
Treasurer prior to December
1994.
Jeffrey P. Polucha 44 Vice President, Vice President Marketing and
Marketing and Development since December
Development 1994; Manager Residential and
Propane Sales prior to December
1994.
10
PART II
Item 5 Market for the Registrant's Securities
and Related Stockholder Matters
--------------------------------------
The common stock market prices, dividends declared and dividend
restrictions appearing on pages 1, 6 and 25 of the Annual Report to Stockholders
for the fiscal year ended August 31, 1999 are incorporated herein by reference.
The common stock of Valley Resources, Inc. is listed on the American Stock
Exchange under the symbol VR. There were 2,062 shareholders of record at August
31, 1999.
Item 6 Selected Financial Data
-----------------------
The selected financial data (Summary of Consolidated Operations) appearing
on page 38 of the Annual Report to Stockholders for the fiscal year ended August
31, 1999 is incorporated herein by reference.
Item 7 Management's Discussion and Analysis of Financial Condition and Results
of Operations
-----------------------------------------------------------------------
Management's discussion and analysis of the results of operations,
liquidity and capital resources appearing on pages 33 through 37 of the Annual
Report to Stockholders for the fiscal year ended August 31, 1999 are
incorporated herein by reference.
Item 7A Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
Not applicable
Item 8 Financial Statements and Supplementary Data
-------------------------------------------
The following consolidated financial statements of the registrant and its
subsidiaries appearing on pages 18 through 32 in the Annual Report to
Stockholders for the fiscal year ended August 31, 1999 are incorporated herein
by reference:
Consolidated Statements of Earnings for each of the three years in the
period ended August 31, 1999
Consolidated Statements of Cash Flows for each of the three years in
the period ended August 31, 1999
Consolidated Balance Sheets - August 31, 1999 and 1998
Consolidated Statements of Changes in Common Stock Equity for each of
the three years in the period ended August 31, 1999
Consolidated Statements of Capitalization - August 31, 1999 and 1998
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
---------------------------------------------
None.
11
PART III
Item 10 Directors and Executive Officers of the Registrant
--------------------------------------------------
For information with respect to the executive officers of the registrant,
see "Executive Officers of the Registrant" at the end of Part I of this report.
Information regarding the directors of the registrant appearing on pages 2
through 5 of the Proxy Statement filed with the Securities and Exchange
Commission on November 9, 1999 is incorporated herein by reference.
Section 16 (a) Beneficial Ownership Reporting Compliance
- ---------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's executive officers and directors and persons who own more than 10%
of a registered class of the Corporation's equity securities ("insiders") to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission ("SEC"). Insiders are required by SEC regulation to furnish
the Corporation with copies of all Section 16(a) forms they file. Based solely
on review of the copies of such forms furnished to the Corporation, the Form 4
for the month of May 1999 for Alfred P. Degen was filed one date late for the
purchase of 1,000 shares of Common Stock. Due to a clerical error, dividend
reinvestment plan acquisitions on Form 5 for Messrs. DeAngelis, Farnum, Davison
and Guthrie were filed 16 days late.
Item 11 Executive Compensation
----------------------
Information regarding management compensation appearing on pages 6 through
9 of the Proxy Statement filed with the Securities and Exchange Commission on
November 9, 1999 is incorporated herein by reference.
Item 12 Security Ownership of Certain
Beneficial Owners and Management
--------------------------------
Information regarding the beneficial owners of more than 5 percent of the
outstanding Common Stock of the Corporation, the only class of equity security
issued and outstanding, and the security ownership of management appearing on
pages 1 and 2 of the Proxy Statement filed with the Securities and Exchange
Commission on November 9, 1999 is incorporated herein by reference.
Item 13 Certain Relationships and Related Transactions
----------------------------------------------
None.
12
PART IV
Item 14 Exhibits, Financial Statement
Schedules and Reports on Form 8-K
---------------------------------
(a) 1. The following consolidated financial statements of Valley Resources,
Inc. and subsidiaries appearing on pages 18 through 32 in the Annual
Report to Stockholders for the year ended August 31, 1999 are incorpo-
rated by reference in Item 8:
Consolidated Statements of Earnings for each of the
three years in the period ended August 31, 1999
Consolidated Statements of Cash Flows for each of the
three years in the period ended August 31, 1999
Consolidated Balance Sheets - August 31, 1999 and 1998
Consolidated Statements of Changes in Common Stock Equity
for each of the three years in the period ended August 31,
1999
Consolidated Statements of Capitalization - August 31, 1999
and 1998
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
(a) 2. Consolidated Financial Schedule
Schedule VIII - Valuation and Qualifying Accounts
Report of Independent Certified Public Accountants on Consolidated
Financial Schedule
Schedules I, II, III, IV, V, VI, VII, IX, X, XI, XII, XIII and XIV are
either inapplicable or not required or the required information is
shown in the financial statements or notes thereto under the
instructions and have been omitted.
(a) 3. Exhibits
3. (a) Articles of Incorporation, as amended (Exhibit 3 to the Corpo-
ration's Annual Report on Form 10-K for the year ended
August 31, 1988 is hereby incorporated by reference.)
3. (b) Bylaws of the Corporation (Exhibit 3 to the Corporation's
Annual Report on Form 10-K for the year ended August 31,
1988 is hereby incorporated by reference.)
4. (a) Shareholder Rights Plan dated as of June 18, 1991 (Filed on
Form 8-K dated June 28, 1991 is hereby incorporated by
reference.)
13
4. (b) Indenture between Valley Resources, Inc. and Mellon Bank,
N.A., Trustee dated as of September 1, 1997. (Exhibit 4 to
the Corporation's Registration Statement on Form S-2
(File No. 333-30113) is hereby incorporated by reference.)
4. (c) Indenture of First Mortgage dated as of December 15, 1992
between Valley Gas Company, Valley Resources, Inc.
as guarantor and State Street Bank and Trust Company,
Trustee (Exhibit 4 to the Corporation's Annual Report on
Form 10-K for the year ended August 31, 1993 is hereby
incorporated by reference.)
4. (d) Loan Agreement between Valley Resources, Inc. and Fleet
National Bank dated June 30, 1997 (Exhibit 10 to the Corpo-
ration's Quarterly Report on Form 10-Q for the quarter ended
May 31, 1997 is incorporated herein by reference.)
10. Compensation Contracts or Arrangements
10. (a) Valley Gas Company Supplemental Retirement Plan (Exhibit 10 to
the Corporation's Annual Report on Form 10-K for the year
ended August 31, 1989 is hereby incorporated by reference.)
10. (b) Valley Resources, Inc. Directors Retirement Plan (Exhibit 10
to the Corporation's Annual Report on Form 10-K for the year
ended August 31, 1992 is hereby incorporated by reference.)
10. (c) Valley Resources, Inc. 1999 Executive Incentive Plan dated
September 1, 1998.
10. (d) Change in Control agreement dated April 1, 1999 between Valley
Resources, Inc. and Alfred P. Degen.
10. (e) Change in Control agreement dated June 15, 1999 between Valley
Resources, Inc. and Sharon Partridge, as amended June 15,
1999.
10. (f) Change in Control agreement dated April 1, 1999 between Valley
Resources, Inc. and Charles K. Meunier.
10. (g) Change in Control agreement dated April 1, 1999 between Valley
Resources, Inc. and Richard G. Drolet.
10. (h) Change in Control agreement dated April 1, 1999 between Valley
Resources, Inc. and Jeffrey P. Polucha.
Other Material Contracts or Agreements
10. (i) Firm Storage Service Transportation contract between Valley
Gas and Tennessee Gas Pipeline Company, dated December 15,
1985 (Exhibit 10 to the Corporation's Annual Report on Form
10-K for the year ended August 31, 1986 is hereby incorpo-
rated by reference.)
10. (j) Storage Service Agreement dated July 3, 1985 between Valley
Gas and Consolidated Gas Transmission Corporation
(Exhibit 10 to the Corporation's Registration Statement on
Form S-2 (File No. 2-99315) is hereby incorporated by
reference.)
10. (k) Underground Storage Service Agreement dated October 3, 1984
between Valley Gas and Penn-York Energy Corporation
(Exhibit 10 to the Corporation's Registration Statement on
Form S-2 (File No. 2-99315) is hereby incorporated by
reference.)
14
10. (l) Underground Storage Service Agreement dated August 19, 1983
between Valley Gas and Penn-York Energy Corporation
(Exhibit 10 to the Corporation's Annual Report on Form 10-K
for the year ended August 31, 1983 is hereby incorporated by
reference.)
10. (m) Service agreement for storage of LNG dated June 30, 1982
between Valley Gas and Algonquin LNG, Inc. (Exhibit 10 to
the Corporation's Annual Report on Form 10-K for the year
ended August 31, 1982 is hereby incorporated by reference.)
10. (n) Contract for the purchase of natural gas dated March 1, 1981,
between Valley Gas and Tennessee Gas Pipeline Company
(Exhibit 10 to the Corporation's Annual Report on Form 10-K
for the year ended August 31, 1981 is hereby incorporated by
reference.)
10. (o) Storage Service Transportation contract dated May 15, 1981,
between Valley Gas and Tennessee Gas Pipeline Company
(Exhibit 10 to the Corporation's Annual Report on Form 10-K
for the year ended August 31, 1981 is hereby incorporated by
reference.)
10. (p) Storage Service Transportation contract dated May 26, 1981,
between Valley Gas and Tennessee Gas Pipeline Company
(Exhibit 10 to the Corporation's Annual Report on Form 10-K
for the year ended August 31, 1981 is hereby incorporated by
reference.)
10. (q) Storage Service Agreement dated February 18, 1980, between
Valley Gas and Consolidated Gas Supply Corporation
(Exhibit 10 to the Corporation's Annual Report on Form 10-K
for the year ended August 31, 1981 is hereby incorporated by
reference.)
10. (r) Precedent Agreement for Firm Services on Maritimes and
Northeast Pipeline Project Phase II dated September 21,
1996, between Valley Gas and Maritimes and Northeast
Pipeline L.L.C. (Exhibit 10 to the Corporation's Regis-
tration Statement on Form S-2 (File No. 333-30113) is
hereby incorporated by reference.)
10. (s) Gas Sales Agreement dated June 15, 1992 between Aquila Energy
Marketing Corporation and Valley Gas (Exhibit 10 to the
Corporation's Annual Report on Form 10-K for the year ended
August 31, 1992 is incorporated herein by reference.)
10. (t) Gas Sales Agreement dated June 8, 1992 between Natural Gas
Clearinghouse and Valley Gas Company (Exhibit 10 to the
Corporation's Annual Report on Form 10-K for the year ended
August 31, 1992 is incorporated herein by reference).
13. Annual Report to Stockholders.
21. Subsidiaries of the Registrant (Exhibit 21 to the Corporation's Annual
Report on Form 10-K for the year ended August 31, 1996 is incorpo-
rated herein by reference.)
23. Consent of Grant Thornton LLP.
27. Financial Data Schedule.
(b) No Form 8-K was required to be filed for the last quarter of the
period covered by this report.
15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
VALLEY RESOURCES, INC. AND SUBSIDIARIES
Date: November 26, 1999 By s/S. Partridge
---------------------------------------
Sharon Partridge
Vice President, Chief Financial Officer,
Secretary & Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: November 26, 1999 s/A. P. Degen
----------------------------------------
Alfred P. Degen, Chairman, President and
Chief Executive Officer
Date: November 26, 1999 s/S. Partridge
----------------------------------------
Sharon Partridge, Vice President, Chief
Financial Officer, Secretary & Treasurer
Date: November 26, 1999 s/E. N. Agresti
----------------------------------------
Ernest N. Agresti, Director
Date: November 26, 1999
----------------------------------------
Melvin G. Alperin, Director
Date: November 26, 1999
----------------------------------------
C. Hamilton Davison, Director
Date: November 26, 1999 s/D. A. DeAngelis
----------------------------------------
Don A. DeAngelis, Director
Date: November 26, 1999
----------------------------------------
James M. Dillon, Director
Date: November 26, 1999 s/J. K. Farnum
----------------------------------------
Jonathan K. Farnum, Director
Date: November 26, 1999 s/J. F. Guthrie
----------------------------------------
John F. Guthrie, Jr., Director
Date: November 26, 1999
----------------------------------------
Eleanor M. McMahon, Director
16
Item 14(a) 2
VALLEY RESOURCES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE VIII
Fiscal Years Ended August 31, 1999, 1998 and 1997
Column A Column B Column C Column D Column E
-------- -------- --------------------------------- -------- --------
Additions
---------------------------------
Balance at (1) (2) Deductions Balance at
Beginning of Charged to Costs Charged to from End of
Description Period and Expenses Other Accounts Reserves Period
----------- ------------ ---------------- -------------- ---------- ----------
1999
- ----
Allowance for doubtful accounts $928,279 $1,247,842 $123,891 (a) $ 990,602 (b) $1,309,410
1998
- ----
Allowance for doubtful accounts $840,433 $1,912,813 $126,610 (a) $1,951,577 (b) $ 928,279
1997
- ----
Allowance for doubtful accounts $719,721 $1,603,597 $183,220 (a) $1,666,105 (b) $ 840,433
Notes: (a) Collections on accounts previously charged off.
(b) Accounts charged off.
17
Report of Independent Certified Public Accountants
on Consolidated Financial Schedule
To the Shareholders of
Valley Resources, Inc.
In connection with our audit of the consolidated financial statements of
Valley Resources, Inc. and subsidiaries referred to in our report dated
September 27, 1999, which is included in the Annual Report to Stockholders and
incorporated by reference in Part II of this form, we have also examined the
schedule listed in the index at Part IV, Item 14(a)2. In our opinion, this
schedule presents fairly, in all material respects, the information required to
be set forth therein.
GRANT THORNTON LLP
Boston, Massachusetts
September 27, 1999
18